By Rob Wile – Business Insider –
A civil war is emerging between Bitcoin’s earliest and most libertarian adopters, and a more commercial wing seeking to embrace regulation as a means of legitimizing Bitcoin businesses.
The divide came into focus this week with two key events events. One was a hearing on Bitcoin regulation by the New York Department Of Financial Services. The other was the arrest of BitInstant CEO Charlie Shrem on money laundering charges.
Until the moment of his arrest, Shrem, 24 had been something of a darling in the Bitcoin venture capital community — the Winklevoss brothers were one of BitInstant’s earliest investors, and Shrem was scheduled to co-headline a Bitcoin conference in Miami this past weekend.
But on the first day of hearings about the future of Bitcoin regulation convened this week by the New York Department of Financial Services, a panel of VCs were quick to disavow Shrem as an example of a more immature wing of Bitcoin. The Winklevoss twins said they were gratified the Department was discussing ways to help legitimize Bitcoin commerce. Their Bitcoin ETF is awaiting regulatory approval from the SEC.
The division is not just about sheer dollar size. Appearing at the Tuesday hearing, Fred Wilson — whose Union Square Ventures spearheaded a $5 million investment round in Bitcoin wallet firm Coinbase warned against anything but the lightest-touch regulations. He compared the dangers Bitcoin startups would face to what happened to early-stage music streaming platforms, which were inundated with lawsuits from record labels. Should Bitcoin startups be subject to similar legal scrutiny from financial regulators, he said, they would be snuffed out before they even had a chance to bloom.
